Correlation Between Consol Energy and Indo Tambangraya

Can any of the company-specific risk be diversified away by investing in both Consol Energy and Indo Tambangraya at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Consol Energy and Indo Tambangraya into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Consol Energy and Indo Tambangraya Megah, you can compare the effects of market volatilities on Consol Energy and Indo Tambangraya and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Consol Energy with a short position of Indo Tambangraya. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consol Energy and Indo Tambangraya.

Diversification Opportunities for Consol Energy and Indo Tambangraya

-0.57

Correlation Coefficient

Consol Energy  Indo Tambangraya

Excellent diversification

The 3 months correlation between Consol and Indo is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Consol Energy and Indo Tambangraya Megah in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indo Tambangraya Megah and Consol Energy is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Consol Energy are associated (or correlated) with Indo Tambangraya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indo Tambangraya Megah has no effect on the direction of Consol Energy i.e., Consol Energy and Indo Tambangraya go up and down completely randomly.

Pair Corralation between Consol Energy and Indo Tambangraya

Given the investment horizon of 90 days Consol Energy is expected to generate 0.87 times more return on investment than Indo Tambangraya. However, Consol Energy is 1.15 times less risky than Indo Tambangraya. It trades about 0.13 of its potential returns per unit of risk. Indo Tambangraya Megah is currently generating about -0.06 per unit of risk. If you would invest  9,554  in Consol Energy on September 17, 2024 and sell it today you would earn a total of  2,032  from holding Consol Energy or generate 21.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Consol Energy  vs.  Indo Tambangraya Megah

Consol Energy

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Consol Energy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Consol Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Indo Tambangraya Megah

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indo Tambangraya Megah has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Consol Energy and Indo Tambangraya

The main advantage of trading using opposite Consol Energy and Indo Tambangraya positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consol Energy position performs unexpectedly, Indo Tambangraya can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Indo Tambangraya will offset losses from the drop in Indo Tambangraya's long position.

The idea behind Consol Energy and Indo Tambangraya Megah pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.